Behavioral Economics For Dummies

A guide to the study of how and why you really make
financial decisions

While classical economics is based on the notion that people act
with rational self-interest, many key money decisions—like
splurging on an expensive watch—can seem far from rational.
The field of behavioral economics sheds light on the many subtle
and not-so-subtle factors that contribute to our financial and
purchasing choices. And in Behavioral Economics For Dummies,
readers will learn how social and psychological factors, such as
instinctual behavior patterns, social pressure, and mental framing,
can dramatically affect our day-to-day decision-making and
financial choices.

Based on psychology and rooted in real-world examples,
Behavioral Economics For Dummies offers the sort of insights
designed to help investors avoid impulsive mistakes, companies
understand the mechanisms behind individual choices, and
governments and nonprofits make public decisions.

A friendly introduction to the study of how and why people
really make financial decisions

The author is a professor of behavioral and institutional
economics at Victoria University

An essential component to improving your financial
decision-making (and even to understanding current events),
Behavioral Economics For Dummies is important for just about
anyone who has a bank account and is interested in why—and
when—they spend money.

Morris Altman, PhD, is a professor of behavioral economics at Victoria University of Wellington in New Zealand and a professor of economics at the University of Saskatchewan in Canada. He is on the board of the Society for the Advancement of Behavioral Economics and is a former president of that organization. He also edited the Handbook of Contemporary Behavioral Economics.

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We all think that we make financial and economic decisions based purely on rational self-interest and conventional wisdom, but the truth is that a whole host of subtle and not-so-subtle factors contribute to our financial and purchasing choices, whether we’re aware of it or not. They’re the reasons we can make impulsive investment mistakes, why stock markets sometimes plunge so dramatically, and why governments make certain policy decisions.

Morris Altman, professor at Victoria University of Wellington and author of Behavioral Economics For Dummies (Wiley; February 2012; $25.99; Paper) says that behavioral economics – the study of how social and psychological factors such as social pressure, – is key to understanding our financial and economic decisions, and to making better ones in the future.

“Behavioral economics doesn’t assume that people must or even should behave in a way that’s deemed rational by conventional economics,” says Altman. “The fact is, more often than not, people behave in ways that aren’t consistent with the conventional wisdom.”

That’s not to say that conventional economics have no place in the economic and financial world – quite the opposite. It’s the addition of behavioral economics that enriches our traditional ideas by using insights from the fields of psychology, sociology, the law, neuroscience, and politics. “We end up with more vibrant and revealing economic analyses based on more realistic assumptions about how individuals behave in the real world and the real-world circumstances that influence the decisions they make,” says Altman.

Morris Altman is available for interviews and can speak about:

The explanation of recessions and stock market plunges, from a behavioral economics perspective;

The top 3 lessons that behavioral economics can teach us about making financial decisions;

Using the principles of behavioral economics to improve one’s finances;

How emotions, culture, past experiences, etc. affect our decisions;

How one’s gender and age affects our choices;

The relationship between the economy and happiness;

How investment firms can use behavioral economics to improve productivity.

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